Sustainability Reporting: Legal Requirements and Best Practices for Philippine Companies

Sustainability reporting has become increasingly important for Philippine companies as stakeholders demand transparency, accountability, and responsible corporate practices. Beyond ethical considerations, there are legal requirements and best practices that companies need to adhere to when reporting on their sustainability initiatives. In this blog post, we’ll explore the legal requirements and best practices for sustainability reporting that Philippine companies should consider.

1. Legal Framework for Sustainability Reporting:
   In the Philippines, the Securities and Exchange Commission (SEC) issued the Memorandum Circular No. 18, Series of 2021, mandating the submission of sustainability reports for listed companies and other entities. Under this circular, covered entities are required to disclose their sustainability policies, initiatives, and performance indicators in their annual or integrated reports. Additionally, the Philippine Stock Exchange (PSE) requires listed companies to disclose sustainability-related information in their corporate governance reports. Compliance with these regulatory requirements is essential for Philippine companies to demonstrate their commitment to sustainability and meet investor expectations.

2. Global Reporting Standards:
   Philippine companies can also align their sustainability reporting practices with international standards and frameworks, such as the Global Reporting Initiative (GRI), the Task Force on Climate-related Financial Disclosures (TCFD), and the Sustainability Accounting Standards Board (SASB). These frameworks provide guidance on reporting principles, indicators, and metrics for environmental, social, and governance (ESG) performance. By adopting global reporting standards, Philippine companies can enhance the comparability, credibility, and relevance of their sustainability disclosures and demonstrate alignment with global best practices.

3. Materiality Assessment:
   A materiality assessment is a crucial step in sustainability reporting, enabling companies to identify and prioritize ESG issues that are most relevant and significant to their business and stakeholders. Philippine companies should conduct materiality assessments to determine the key sustainability topics, risks, and opportunities that impact their long-term value creation. This involves engaging with stakeholders, including investors, employees, customers, suppliers, and communities, to understand their expectations and concerns regarding sustainability performance. By focusing on material ESG issues, companies can enhance the relevance and effectiveness of their sustainability reporting efforts.

4. Stakeholder Engagement:
   Stakeholder engagement is essential for meaningful sustainability reporting, as it ensures that companies capture diverse perspectives, interests, and feedback from their stakeholders. Philippine companies should engage with stakeholders through dialogues, consultations, surveys, and feedback mechanisms to gather input on sustainability priorities, performance, and reporting practices. Engaging with stakeholders fosters transparency, trust, and accountability and enables companies to address stakeholder concerns and expectations in their sustainability disclosures.

5. Integration with Financial Reporting:
   To enhance the credibility and integrity of sustainability reporting, Philippine companies should integrate ESG disclosures with their financial reporting processes. Integrated reporting combines financial and non-financial information to provide a holistic view of the company’s value creation story, strategy, and performance. Philippine companies can adopt integrated reporting frameworks, such as the International Integrated Reporting Framework (IIRC), to communicate how sustainability factors impact financial performance and long-term business resilience. Integrating ESG disclosures with financial reporting promotes transparency, consistency, and accountability and enables stakeholders to make informed investment decisions.

6. Continuous Improvement and Assurance:
   Sustainability reporting is an iterative process that requires continuous improvement, monitoring, and assurance to ensure accuracy, reliability, and relevance of disclosures. Philippine companies should establish internal controls, data management systems, and performance tracking mechanisms to collect, validate, and report sustainability data effectively. Additionally, companies may consider obtaining external assurance or verification of their sustainability reports to enhance credibility and trust among stakeholders. Continuous improvement and assurance processes demonstrate the company’s commitment to transparency, accountability, and excellence in sustainability reporting.

Conclusion:

Sustainability reporting is an essential tool for Philippine companies to communicate their ESG performance, demonstrate accountability, and build trust with stakeholders. By adhering to legal requirements, adopting global reporting standards, conducting materiality assessments, engaging with stakeholders, integrating with financial reporting, and ensuring continuous improvement and assurance, companies can enhance the quality, relevance, and impact of their sustainability disclosures. Sustainability reporting not only fulfills regulatory obligations but also contributes to long-term value creation, resilience, and sustainability for Philippine companies in an increasingly ESG-conscious world.